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Billionaire Bets on China - Will You?

Written by Wednesday, 10 June 2009 00:072,353 Comments

Billionaire George Soros may be politically controversial in America but his financial track record is still very impressive. He made a fortune by betting against an overvalued British pound and he was among the first to predict the U.S. financial crisis, caused by what he called a credit "super bubble."

Now Soros is making headlines within China. His predictions are right in line with our own forecasts at the China Stock Digest, and very encouraging for our model portfolio. Speaking at Shanghai's Fudan University, Soros predicted that China's economy will grow faster than people expect and so will its global economic influence.

China will be the first country to recover from the global financial crisis, Soros says and indeed it is on track for continued expansion. As we have reported, China's GDP grew by 6.1% during the first quarter while the U.S. shrank by the same amount. China's continuing growth and its powerful position as America's banker will transform the world's financial order.

Despite signs of recovery in U.S. stock markets, Soros told the Chinese that the world is still in a bear market, and China is the exception. He went even further, predicting that China could "replace the United States as the engine of global economic growth."

During the height of the financial crisis, the China Stock Digest made substantial profits with short term bets on several Chinese banks. As Soros noted, Chinese banking has benefited from being isolated from the rest of the world and is in better shape than the international banking system. China's extensive capital controls helped to shield its financial institutions from the worst of the global financial crisis.

China's banks have also become an important force in helping the Chinese economy recover from a sharp decline in exports to western nations. In addition to a massive government stimulus program, China's biggest banks have flooded the economy with new loans to boost internal consumption and development. As Soros put it, "when the government says 'lend', banks lend. This puts China in a better position to recover from the recession and that is in fact what has happened."

Few economists agree with Soros about China's potential ability to become the new engine of worldwide growth. But there's little doubt that China is moving faster than the United States to boost its own economy.

The success of China's stimulus plan is already showing up in a number of key indicators, as we noted in the current issue of the China Stock Digest. Although China may not save any western economies, it is clearly a beacon of hope to its trading partners in Asia.

We remain very cautious about the stock market rebound in the United States. The problems in the U.S. economy remain critical and we may be seeing a bear market rally on American exchanges. In Shanghai, Chinese "A" shares are still trending strongly upward with a gain for the year of 52 percent, substantially better than U.S. stock performance. Although some observers are warning that certain companies on the Shanghai Exchange are overvalued, the soaring value of "A" shares is one more indicator of China's economic expansion at a time when the rest of the world is still reaching for a lifeline.

As George Soros put it, "China should play a constructive role in the reconstruction of the global economic system...China is a positive force when the world economic and political orders are in disarray."

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Dedicated To Your Financial Freedom,

Jim Trippon
Editor-In-Chief
China Stock Digest

http://www.chinastockdigest.com

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China Stock Market - Cashing in Double Digit Profits

Written by Tuesday, 21 April 2009 23:57978 Comments

We’re cashing in our gains once again at the China Stock Digest! Just last Tuesday we alerted you that we were raising our “Profit Protector” stop loss thresholds on all holdings in our model portfolio. With China on the rebound we wanted to protect gains as high 30 percent (or more) on some of our most recent purchases.

It looks like we made the right decision. During a broad market pullback three of our holdings hit their profit protector prices and were stopped out. We’re now delighted to report substantial gains for our subscribers on those stocks

• A Chinese medical supply company delivered a gain to subscribers of 31 percent. That’s a very nice return for a two week investment!

• A top Chinese pharmaceutical company also produced double digit gains up more than 15 percent for our subscribers.

• One of our old reliable favorites a leading Chinese telecommunications company/ also delivered gains for us as usual returning almost 9 percent to China Stock Digest subscribers over a relatively short holding period of more than two months.

The fact that we took profits on these companies doesn’t indicate that we’re pessimistic about their prospects. All three are still excellent companies, as we believe are the remaining holdings in the China Stock Digest model portfolio. We will likely return to these firms if and when they become substantially undervalued once again.

We can’t urge our subscribers strongly enough to watch their email inboxes for portfolio changes like last week’s stop loss revisions. These are important bulletins that do more than recommend new investments. They also help protect subscribers against sudden losses in today’s highly volatile investing environment.

We do expect to make new investment recommendations in the near future as the Chinese economy continues its world-beating economic growth curve. We are happy to report that China’s economy delivered GDP growth at a 6.1% rate during the first quarter of 2009. By historical standards that’s a relatively low rate of expansion for China and many stocks had fallen back in previous months in anticipation of a relatively weak first quarter.

But relative to the rest of the world China continues to boom, even while the global financial crisis drives massive corporations like General Motors to the brink of bankruptcy.
Looking to the future, China’s Premier, Wen Jiabao is predicting a “bounce” in his country’s growth curve. In a recent Asian conference Premier Wen said the economy was “better than expected.” Wen cited pick-ups in investment, consumption and industrial output, as well as ample liquidity in the banking system. In addition to a huge stimulus package, China is flooding the system with money provided by the nation’s robust banking sector.

“China got its stimulus plan started months ahead of the U.S. and it’s really working,” Frank Newman, chairman of Shenzhen Development Bank told Bloomberg news recently. Newman, who served as a deputy secretary of the U.S. Treasury from 1994 to 1995 has a unique vantage point, reporting from Shenzhen, “We see a lot of fiscal stimulus in action because we are financing it.”

It’s too early to tell whether or not western industrial economies are bottoming out, or if we are experiencing a dead cat bounce on New York’s stock markets. But there’s little doubt that China is currently leading in the race for economic recovery.

Remember, these are fast-moving times so watch your email for breaking news and investment recommendations. This is Jim Trippon, editor of China Stock Digest staying committed to your profits in China.

To get a free copy of China Stock Digest, Visit:http://www.investmentchina.net

Is China's Economy Doomed?

Written by Tuesday, 02 December 2008 06:351,560 Comments

IsÂ Chinaâ€™s Economy Doomed?Boom or Bust
Making Sense of Many Predictions about China

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â€œOnce known asÂ an economic miracle, China now heads for an economic catastrophe.â€Â This recent internet posting contained terrifying words to be sure. But thisÂ isolated publication was just one of countless predictions calling for everythingÂ from boom to bust for China over the past few days. Whom should we believe?

Thereâ€™s no doubt that ChinaÂ faces big challenges as western economies slip into recession. Orders for Chinaâ€™sÂ exports are still increasing by double digits, but the rate of increase is definitely falling.

One key index, the Purchasing Mangerâ€™s Index (PMI), slumped by 68 percent from its record high last October.Â Export orders shrank by the largest degree since the surveys began, as the worldwideÂ financial crisis weakened demand for Chinaâ€™s toys, textiles and computer products. So whyÂ does Chinaâ€™sÂ economy continue to grow?

As we detail in this monthâ€™sÂ issue of the China Stock Digest, Beijing has opened the floodgatesÂ ofÂ government spending. As much as one trillion dollars worth of stimulusÂ is being injected into key sectors of the Chinese economy.

Just today Beijing uppedÂ the ante by committing another $145 billion to help poor families buy Chinese-madeÂ appliances. This new campaign is designed to absorb the excess production capacityÂ caused by the export slump and to benefit industries like steel, plastics, andÂ electronics.

This will be the key toÂ keeping the Chinese economy in expansion mode, boosting the internal economy.

The worst case scenario?Â Probably the lowest authoritative prediction for the growth of Chinaâ€™s economy
comes from the World Bank. Just a few days ago the bank cut its forecast forÂ Chinaâ€™s expansion from 9.2% to 7.5%. If only the U.S. could manage to grow halfÂ as fast.

As deeply as the World BankÂ cut its forecast, it said the country has "adequate tools" to keep the economy
moving at a healthy pace. Sure enough, one of those measures came out of theÂ toolbox this week as the value of the Chinese yuan tumbled by record percentagesÂ against the dollar. This wonâ€™t be popular in Washington, but it will make ChineseÂ exports more attractive to western buyers.

Not surprisingly, the brightestÂ projections about the future of Chinaâ€™sÂ economy come fromÂ

Beijing.Â A key member ofÂ Chinaâ€™sÂ State Council declared to the state-controlled media that the economy would
Â grow at a blazing-fast 10% rate next year. How is that possible?

The â€œhugeâ€ potential ofÂ domestic consumption and investment can counter the impact of a global slowdown.
While President Hu Jintao admitted that the central government faces enormousÂ challenges coping with the global financial crisis, the shift to internal economicÂ expansion is the key.

Exploiting the â€œvast developmentÂ potentialâ€ of the worldâ€™s most- populous nation is crucial, so says the powerfulÂ State Council. Beijing is now working on further steps to help struggling companiesÂ in the steel, automotive, petrochemical and textile industries. It may alsoÂ expand insurance for the jobless, a critical measure to avoid civil disturbances.

How times change! Just aÂ few months ago China was clamping down on credit and reining in price increasesÂ to prevent the economy from overheating. With amazing speed, the governmentÂ has changed from jamming on the brakes to hitting the gas with both feet.

The state pension fund hasÂ pledged to invest more in Chinaâ€™s depressed domestic stock markets. Insurance
Â companies have also been instructed to boost their stock investments. WhetherÂ or not we believe that any government should tamper with the markets, the factÂ remains that

Beijing is committedÂ to do whatever it takes to keep the nationâ€™s economic engine humming.

What does all this meanÂ for investment in China? Although shares in Shanghai tend to rebound with every new stimulus announcement, we invest mainly in ADRsÂ in the U.S. For the time being ADRs continue to follow Wall Street trends.

As we know, U.S. stock marketsÂ are continuing to gyrate wildly, and China-based ADRs are fluctuating in tandem.Â We donâ€™t foresee stabilization among U.S. markets in the near future. Thatâ€™sÂ why weâ€™re maintaining an extremely conservative policy towards China investments.

For the short term, newÂ reports of weakness in the Chinese economy may further depress shares. But the
Beijingâ€™s stimulus plans may have widespread effects during the first half ofÂ 2009. Thatâ€™s when we may see the U.S.Â and China moving even more decisively in opposite directions.

As long as Chinese sharesÂ are being discounted, future buying opportunities are being created.

Doomsayers who predict catastropheÂ for China are always coming out with new predictions. The evidence says theyÂ are wrong again. Challenging months are ahead but challenge can create new opportunities.

KeepÂ your eyes on your email inbox as we look for new opportunities. Our investmentÂ recommendations for this period will depend on quick buys and equally fast sales.

December'sÂ issue of China Stock Digest put 8 stocks on the watch list. Subscribe now toÂ gain access to these 8 stocks that have already earned an average of a 28% returnÂ in the third quarter of 2008. Subscribe now to gain access to these 8 stocksÂ that have already earned an average of a 28% return in the third quarter ofÂ 2008: http://www.chinastockdigest.com/Page.php?Category=risk-free-subscription

CommittedÂ to your PROFITS from China,

JimÂ TripponÂ
Editor In ChiefÂ
China Stock Digest
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P.S. DidÂ you know that May's earthquake in China was first reported on Twitter -2 hours before it was on any syndicated news station. Do you want thatÂ same early warning system for the most recent development in the China StockÂ Market? Follow China Stock Digest on Twitter: http://twitter.com/csdtrippon
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